Creating a strategic plan for your business is often the hardest part of drawing up your business plan, but the discipline of doing so will give you a greater understanding into your business.
Your plan should be seen to underpin, or enhance, your stated goals and objectives, and does this by setting out the strategies that will be put in place to achieve them.
Most business plans include strategies to put into place over the next 12 to 18 months. As you are planning the future direction of your business, you might find that some of your strategies should not be introduced within this period of time.
Accordingly, it is a good idea to think about your business in the light of two time frames. Plan what you would like to put in place immediately, and, likewise, think about your long-term plans.
The short-term plan should include strategies that will be implemented within the next 12 months, and include monthly or quarterly budgets.
The long-term plan could cover a three to five year period, and include tentative strategies and budgets on a quarterly or annual basis.
In order to devise your strategic plans you will need to look at all the exercises and wish lists you have completed for each chapter.
Your aim is to review them and determine:
What will be the most practical and effective changes to make
What should be implemented at a later stage
What should be discarded
What should remain on your wish list for future consideration.
Reviewing the list of changes you should make
Before you start to review your lists and work sheets, you should take a little time to think about your goals and consider where you want your business to be in five years time.
Then see if you can identify what you will need to do to get there.
Say, for example, you feel that sometime in the future you would like to expand your business and move to larger premises, or perhaps open another branch of your business, you should put this in your longer-term plan. Include what you think you will need to achieve in order to afford this.
This plan’s purpose is to provide you with a scenario of where you want your business to be eventually, but is not intended as a fixed template for change.
Complete the ‘Five Year Target’ section in the work sheet, seeing if you can assign some strategies to achieve your goals. Allocate a tentative time frame next to these strategies.
Next identify your wish lists and checklists and see if there is a correlation between them and what you now consider is needed for your long and short-term goals.
Before you determine that these are your final strategies, you must assess the position of your business as a whole for its current strengths and weaknesses, as well as the external factors that impact on it.
You should also then complete a ‘Short Term Goals and Strategies’ list. This will impact on your final business plan. And remember:
The most important areas should be concentrated on first
Strategies should be realistic
Strategies should be achievable
Strategies should be measurable.
Additionally you must take into account whether the changes will bring in more money or improve services.
Allocate a tentative cost next to these strategies. For example, your goal could be to maintain and improve the provision of products to your customers. In this case, your strategies might be to:
Assess customer satisfaction with your supply of product
Identify weaknesses in supply
Assess strengths and weaknesses of competitors provision of product
Determine what products you could introduce to fulfil market need
Advertise the new products
Assess the product turnover rate
Increase or decrease supply as required
Reassess customer satisfaction with your supply.
Next, complete your future plan reasonably accurately and then file it away for future reference. The value of creating this first is that it ensures that all strategies you implement now will comply with the future direction of the business. Once this is done, you can look closer at what else is required for your present business plan.
You need to:
- Decide the time frame for implementing changes
- Determine the cost of your changes
- Draw up a new budget including these costs
- Determine if you will have to raise more money.
The time frame for implementing changes
With a pre-determined schedule for change you are less likely to become so involved in the day-to-day running of your business that you don’t actually get down to making those changes.
Accordingly you need to plan when to implement your changes. Go through the strategies you have decided to implement and decide when you would like to have each strategy in place. Then work back to determine when you should start working towards that goal.
For example, if you wish to employ a new staff member, and have him/her relatively familiar with your business before the Christmas rush, you should probably have him or her start working for you at the beginning of November.
Working back from that you will have to take into account that the person you employ might currently have another job, and will have to serve out their notice. Depending on the nature of the work, this could be a calendar month’s duration.
Then you must take into account the time it takes to advertise for staff, interview and then choose the most appropriate person. All this could take five to six weeks time.
Accordingly, your ad to attract your new staff member should be in place by the middle to end of August.
Try to organise a weekly or monthly plan for yourself for the following year. Decide what you should start to implement and when, and determine the date when it must be completed or achieved.
A Gantt chart can be very useful to help you work out this type of detail. This is a visual display chart used for scheduling which is based on time. This type of chart provides an easy reference to show whether you are keeping abreast of your planned strategies, or whether these need to be adjusted in some manner.
How much will the changes cost?
Establishing a budget that involves unknown factors means that it will have to be created partly from past experience and partly from educated guess work.
Obviously, in such a case, the more facts and figures you have the easier this will be.
Some costs will be relatively simple to calculate, such as fixed costs like leases or rent, or if you are increasing the amount of product you already handle. In this case, you have existing data you can work with.
It gets more complicated if you are introducing a completely new factor into your business. In this case, you will have to anticipate all the related costs, some of which might not be immediately obvious.
If, for example, you decide to take on a new staff member, you will have to budget for the amount of money you intend to pay this person, as well as extra costs such as superannuation, leave pay and workers’ compensation insurance.
Over and above this, you will need to consider the costs involved in advertising, and in choosing that person, as well as whether you will need to provide them with such things as new furniture, personalised stationery or business cards.
Likewise, should you see the need to move to a different location, you will have to take into account the new rent or mortgage payments, the costs for the different services and utilities, as well as the relocation expenses.
On the other hand, should you decide to close down one aspect of your business and concentrate on a smaller sector, you could find that you save money on such things as staff costs, rent, and other general overheads.
As a guide to estimating the costs related to potential changes, consider the following questions:
What impact will this have on your business?
How much would sales grow over the period?
What would the prices be for the products?
What quantities would you need?
Would the overall operating expenses increase?
Would you need extra employees?
How much would they cost, including pay and related expenses?
Would your present location and facilities be adequate?
Would you need new equipment, and how much would it cost?
Will the financial benefits you gain from these changes warrant the amount of money they will cost to implement?
How much would you need to borrow, and what would be the repayments on this?
These questions are intended as a guide, and your particular questions will depend on your personal situation.
You must remember, all financial projections are an act of faith. You make educated assumptions about your performance for the future, and you have to try to anticipate the impact of external factors on your business.
With this in mind, it might be an idea to prepare two different budgets. The first should set out your expectations, and the second set out the worst case scenario. This second budget should include the required actions you will take if this occurs.
You may wish your accountant to work out your budget for you or perhaps have him/her advise you. Accountants are trained to recognise the financial implications of what you are doing and may have overseen similar change processes in their other clients and can advise you accordingly.
